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Topic: TRU Sues and Wins to Leave Amazon.com (Read 2168 times)

It will be interesting to see how this affects our ability to get figures online...

Toys “R” Us Inc. prevailed in a bitter lawsuit against online giant Amazon.com Thursday when a New Jersey judge ordered the two companies to sever their partnership, clearing the way for the toy retailer to establish an independent Internet store.

Toys “R” Us executives hailed the ruling and said they intended to move quickly to create a new and independent Web site.

"We have been preparing for today's decision and expect to provide seamless online access for our customers to the world's greatest toy store at www.toysrus.com," John Sullivan, senior vice president of the toy company, said in a statement.

But Amazon indicated it is considering an appeal. Spokeswoman Patty Smith said the online retailer "strongly disagrees with the judge’s ruling in this case” and is in the process of reviewing a number of options.

The two retailers signed a 10-year strategic partnership in 2000 — at the height of the Internet stock bubble — that made Amazon.com the exclusive online retail outlet for Toys “R” Us toys, games and baby products.

Whether the agreement also made Toys “R” Us the exclusive provider of such products on Amazon.com was at the heart of the lawsuit, filed in 2004, and a counterclaim filed by Amazon.

The deal originally was hailed as a model for future bricks-n-clicks partnerships, and came as some industry watchers expected online retailers to overwhelm traditional bricks-and-mortar merchants. Based on testimony in a trial last year, the arrangement worked well for both sides for the first several years, improving the ability of Toys “R” Us to compete with eToys and Walmart.com while eliminating toy inventory problems that had been plaguing Amazon.

But Toys “R” Us executives grew increasingly unhappy as the prominence of their virtual store was diminished and Amazon.com signed agreements with rival retailers including Target as well as independent sellers known as zShops.

In a 131-page opinion, New Jersey Superior Court Judge Margaret Mary McVeigh ruled that Amazon had breached its agreement, although she did not award any monetary damages, saying Toys “R” Us was unable to prove it had paid a premium for exclusivity on the site.

In her opinion, McVeigh took a rather dim view of the trial testimony of some Amazon executives, including that of the company’s billionaire founder Jeff Bezos, saying she had “no doubt his knowledge and understanding (of the Toys "R" Us agreement) went much deeper than revealed.”

When pushed on the witness stand, “certain information ‘just came back to him’” she said in the ruling, while another of Bezos’ explanations was referred to as “rather childlike.”

McVeigh also rejected Amazon’s efforts to defend itself by asking her to throw out e-mail evidence that may have included hearsay. She said she found it “incomprehensible … that a corporation dealing primarily in Internet commerce finds Internet communications to lack reliability.”

And she repeatedly complained about the ambiguous use of language in memorandums, contract agreements and discussions, concluding that “the language as drafted whether intentional or inartful gave Amazon the words to play the game their way.”

Although the ruling does not include monetary damages, the loss of Toys “R” Us as a partner could have a significant financial impact on Amazon. The toy retailer, which was sold to a private investment consortium last year for $6.6 billion, says it is the nation’s largest online retailer and had been paying Amazon a base fee of $50 million annually plus a percentage of its sales.

And trial testimony indicated that Amazon has invested heavily to fulfill toy orders, especially during the crucial Christmas season. According to the ruling in the case, Amazon.com has 14 fulfillment centers operating 24 hours a day except for Christmas and New [Years Day].

I saw this last week and thought the same thing Jesse. I wonder how this will effect online sales. Not that TRU/Amazon usually has much (or at a decent price) as far as Star Wars goes anyways, but it will be interesting to see. I've bought some SW (and Marvel Legends) off of Amazon over the years, but its been slower lately.

I'm glad this is getting settled and that TRU is getting away from Amazon. In general I like Amazon.com well enough, but I never liked the partnership between these two.

Part of it was price and availability, most stuff seemed to be sold out quickly and I always wondered if it was because TRU couldn't get it or they didn't allot enough to Amazon. Maybe that'll be fixed with their own store.

The other problem is that I did feel like Amazon was screwing with TRU. The first time I went to "toysrus.com" and searched on SW toys and found vintage Vader figures being offered by Brian's Toys I became a little skeptical of the whole arrangement. I was searching for TRU stock, not Brian's...if I wanted to buy from that shady store I'd use their web site directly...or go to eBay.

I'm still waiting to find out what the new owners of TRU are going to do with it. Will we see any changes (besides store closings), will they streamline their stores to move old product out faster, will they overhaul their stores to make them destinations again? I think TRU has a lot of room for improvement and definitely don't think it's too late for them to be a contender in the toy market again.

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"I sell the drugs that keep you people from seeing dragons at night." - Gus "Psych"

Will we see any changes (besides store closings), will they streamline their stores to move old product out faster, will they overhaul their stores to make them destinations again? I think TRU has a lot of room for improvement and definitely don't think it's too late for them to be a contender in the toy market again.

Don't know if many people read the article from back at the beginning of the month, here's a copy from BusinessWeek, but it goes into some details on how TRU hired a former Target exec and how they see Target as their main competition. In other words, they are going to try to re-establish themselves as the #2 toy seller before they try taking on Wal-Mart again.

The guy that TRU hired was responsible for "Super Target" as well as turning around the struggling Marshall Fields (which Target then sold it as soon as it was profitable again). He seems to have big plans to use some of the classic Target strategies to bring TRU back to it's feet. Only time will tell though I guess if TRU can every retain it's former glory...

Thanks for the info, to me that's great news!! Like was mentioned, I never liked that fact that when searching for toys, like Star Wars, I would get all product from all of their "associates"!! I hated that, I want the Toys R Us site and wanted their product, not the product of a dubious scalper such as Brian's Toys!! Hopefully with that second article that Jeff linked, TRU can come back and become the store most of us who grew up in the 80's knew!!

That's a good article, Jeff. I hadn't seen it but I hadn't looked for a TRU update since the first of the year or so.

Just because of the size of the stores I would think that TRU could even capitalize on the game system market by offering several stations to test games on, carrying stock that small mall stores don't have room for and possibly branching out into some offerings of computer components like mice, joysticks and graphics cards as well as selling gadgets (or do they already? I haven't paid attention because I'm not really a gamer.

Exclusives can always help a store...look what they did for Target last year just with Star Wars. If they could partner with Hasbro and Mattel to offer exclusive products and guarantee shelf space for them I'm sure they could get them to offer merchandise that stores like Wal-Mart and even Target wouldn't accept. WM has gotten so big they can dictate to manufacturers what to make...TRU could easily become an outlet for the manufacturers to take back the power to decide what will be made. Because I'm sure the companies like Hasbro pay more attention to what the consumer wants than WM does.

The one major problem I always had with TRU is their unwillingness to discount crap that isn't selling. Just looking at SW; there's no reason for a store to still have POTJ figures on the shelf battling for space with ROTS toys. That's 3 year old stock. NOBODY carries inventory at retail for 3 years.

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"I sell the drugs that keep you people from seeing dragons at night." - Gus "Psych"

The one major problem I always had with TRU is their unwillingness to discount crap that isn't selling. Just looking at SW; there's no reason for a store to still have POTJ figures on the shelf battling for space with ROTS toys. That's 3 year old stock. NOBODY carries inventory at retail for 3 years.

Well said. I've always felt that was TRU's worst problem - why keep old stuff on your pegs when you could reduce them by a couple dollars and fill the pegs with more popular items? You can't sell something if there isn't room for it on the pegs.

It means that for those of us that grew up in the 80's, however old you were, we should remember how Toys R Us used to be. It was the store to go to for Transfromers, MASK, GI JOE, TMNT, and Star Trek. Star Wars and Masters of the Universe, I mainly went to Dept Stores for them!!

I don't think my post was confusing or meant to say anything else!! What did you take from it??

WM has gotten so big they can dictate to manufacturers what to make...TRU could easily become an outlet for the manufacturers to take back the power to decide what will be made. Because I'm sure the companies like Hasbro pay more attention to what the consumer wants than WM does.

I quite agree E. I think every company that deals with Wal Mart, be it a toy company or a grocer, they are worried at the power Wal Mart yields!! I've read reports that had Mattel giving exclusives to KB or TRU in the hopes of promoting them and trying to even out the playing field!! If they don't, and TRU falls, then there will only be two major stores, Wal Mart and Target, and that's never a good thing!

Well said. I've always felt that was TRU's worst problem - why keep old stuff on your pegs when you could reduce them by a couple dollars and fill the pegs with more popular items? You can't sell something if there isn't room for it on the pegs.

I just remembered something when I read your post...made me laugh. When all the ROTS figures were hitting last year one of the TRU stores I went to had a huge bin for their ROTS figures but you could still find POTJ and VOTC figures on pegs in the regular action figure aisle.

Now, why in the world would you dump cases of new action figures, that people are shopping for, into a bin instead of putting them on a peg where they present better and it's easier for the consumer to shop through? Especially when you had 1 - 3 year old stock taking up the peg space that could have easily gone in the bin for $1 each?

I have to believe that some TRU stores didn't get stocked with as much ROTS merchandise as they would have if they hadn't had older figures still in inventory. I also think that some stores won't discount SW toys because they're known sellers. Over the years there have been on-and-off reports of stores saying they won't carry a lot of SW because it doesn't sell. Yet they wouldn't discount stagnant inventory to move it because you knew they were thinking that; "oh, it's SW, SW always sells."

There's a WM in Pennsylvania that I was just in about a month ago. They still had some Saga 12" figures like Zam and Imperial Officer with "clearance" stickers on them...$19.00. Gimme a break.

One of the worst fiascos that I can think of in TRU's history is probably Godzilla in 1998. Godzilla got a front end "store" to promote the release and they had stuff hanging from the ceiling, stuff was roaring at you when you walked by...it was as big as anything they've done for SW. Movie? Sucked. Tanked (well, cost $130 million...made $130 million. Hated by Godzilla fans.). Toys sat in stores for years before they cleared out. I actually would not be surprised to still find a Godzilla toy in a store, somewhere. Runner's up? Men in Black, Independence Day, Final Fantasy, Planet of the Apes. We were tripping over those properties for at least 3 years in a lot of stores.

In TRU's defense, though, some of them went to clearance relatively quickly, but still not low enough to actually sell. I would think at some point you have to just say fuckit and sell it to a liquidator or put the green tag on it for $1.00 and have a "half off all green tagged prices sale." (Still kicking myself on not scoring a couple 12" Van Helsing figs when they did that in January 2005)

That's one thing that Target does well. They move inventory. Sometimes almost too quickly, but they always get it out of the store eventually. Hopefully that's what this former Target guy will bring to the store. Keep things fresh, keep them moving, know when to cut and run and offer some non-toy items that will bring foot traffic into the stores.

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"I sell the drugs that keep you people from seeing dragons at night." - Gus "Psych"

Well, Amazon.com has lost the first appeal in their effort to retain their e-commerce platform management and merchandising agreement with Toys R Us.

The Court decision allows Toys R Us to terminate the agreement with Amazon.com by June 30 and go ahead with the previously announced plans to create a brand new, self-managed online business (set to open on July 1st).

Can't help but wonder what this will mean for on-line ordering of TRU exclusives?

That's a good question on the preorders. I don't have any at the moment, I cancelled my Gunship after finding it at retail. I waited on the new Battle Pack that's coming because I didn't want it to get delayed indefinitely. Glad I waited now.

I'm hoping that the new TRU web site will be as good as or better than what Amazon was doing as far as shipping goes. It'll be interesting to see how their stock holds up. Will it be a store of "Sold Out" items or will they restock more often?

Lot's of questions. I can't wait till they launch to try them out though.

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"I sell the drugs that keep you people from seeing dragons at night." - Gus "Psych"

Certainly TRU can do better than what Amazon was doing for them. If TRU sets up their new site with adequate stock and reliable shipping (following planned release dates and providing collector-grade packaging), I think it could go a long way to re-establishing them as the toy supplier.